REDEMPTION OF PREFERENCE SHARES NOT TAXABLE AS DEEMED DIVIDEND AND AMOUNTS TO 'TRANSFER'

It is held that redemption of preference shares amounts to 'transfer' of a capital asset under the Income-tax Act and any loss on redemption thereon would thus be allowable as a capital loss. The Tribunal, relied on the Supreme Court (SC) decisions in the case of Anarkali Sarabhai v. CIT [1996] 224 ITR 422 (SC) and Kartikeya Sarabhai v. CIT [1997] 228 ITR 163 (SC) , held that redemption of preference shares has to be considered as 'transfer' and loss on redemption thereof is an allowable long-term capital loss.